Kotak Commodity Services Pvt. Ltd. vs Sebi

referred to as, 'NCDEX') for violation of open interest limits in Guar

seed or Guar gum contracts. The appellant was directed to show

cause as to why a penalty of Rs.77,17,06,599/- should not be

imposed. The show cause notice relied upon various entries in the

bank statements, ledgers, trade-data and demat account, the extracts

of which were depicted in the annexure to the show cause notice.

Subsequently, a supplementary show cause notice dated August 16,

2018 was issued by which the appellant was asked to show as to why

financial penalty of Rs. 8,25,35,302/- should not be imposed. The

list of documents that were specified on which the respondent was

relying upon was indicated in Annexure III to the supplementary

show cause notice. For facility, the same is extracted hereunder :-

"1. Exchange circular no. NCDEX/TRADING-095/2006/195 dated July 31, 2006.

2. Exchange circular no. NCDEX/TRADING-107/2006/223 dated August 29, 2006

3. Exchange letter no. NCDEX/2011-12/MWS-1360 dated January 05, 2012.

4. Exchange circular no. NCDEX/TRADING-003/2012/010 dated January 10, 2012.

5. Exchange circular no. NCDEX/RISK-001/2012/011 dated January 11, 2012.

6. Exchange letter no. NCDEX/2011-12/MWS-1438 dated January 14, 2012.

7. Bank Statement of the clients as received from FMC.

8. Ledger account of the clients as received from the respective member(s). 3

9. Caution letter no. NCDEX/2017/ENF/56 dated June 02, 2017."

3. The appellant applied for a host of documents, some of which

was supplied and others were rejected on the ground that it was

confidential and privileged. The appellant being aggrieved by the

non supply of certain documents has filed the present appeal.

4. Having heard the learned counsel for the parties at some length,

we find that some of the documents which have been sought by the

appellant amounts to a roving and fishing enquiry. We are,

therefore, confining the present appeal to only a certain set of

documents which in our opinion at this stage appears to be relevant.

5. As per the supplementary show cause notice the respondent is

relying on the following documents which are mentioned at serial

nos. 7 and 8, namely, bank statement of the clients as received from

FMC and ledger account of the clients as received from the

respective members. The extract of the bank accounts and the ledger

entries have been indicated by the respondent in their show cause

notice dated July 31, 2018. We find from the extract of the bank

statements and ledger entries that reference has also been made to

certain demat accounts of certain members as well as trade-data. In

our opinion, the law requires that if the respondent is relying upon

those entries/data which have been indicated in the show cause 4

notice and the supplementary show cause notice, it is obligatory for

the respondent to allow inspection of that entries/data to the

appellant.

6. We accordingly dispose the appeal directing the respondent to

allow inspection of redacted entries as indicated in the show cause

notice dated July 31, 2018 and supplementary show cause notice

dated August 16, 2018 with regard to bank statements, ledger entries,

trade-data relied upon in the show cause notice and reference to the

demat accounts of the various members.

7. The Appeal is accordingly disposed of.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C. K. G. Nair Member

Sd/-

Justice M. T. Joshi Judicial Member 12.04.2019 Prepared & Compared by PTM